Empire Co. Ltd. announced Thursday it will close about 50 underperforming stores in its wholly owned Sobeys Inc. grocery chain as part of a plan to cut costs, but we could have seen it coming.

Empire, based in Stellarton and controlled by the founding Sobey family of Pictou County, operates Canada’s second-largest grocery chain, Sobeys, with more than 1,500 retail stores.

After acquiring a major competitor in the western provinces, Canada Safeway ULC, last year for $5.8 billion, the company indicated it would be seeking ways to cut costs and reduce its debt level as quickly as possible.

The Safeway acquisition closed during the third quarter of fiscal 2013-14.

Empire management has maintained from the beginning that it could achieve $200 million in cost-cutting synergies within three years, including $100 million in just the first year.

Anyone who thought Empire could trim the promised $200 million without closing some stores would be guilty of wishful thinking.

Empire president and CEO Marc Poulin told analysts during a conference call Thursday that after closing the Safeway deal, the company went through a strategic evaluation of all its stores with a view to weeding out the weakest performers.

Shuttering the stores, however, will result in future sales forecasts to be cut by about $400 million, or 1.9 per cent of total sales, according to the company.

Without dropping the poorly performing outlets, however, one could surmise it would be nearly impossible for Empire to attain its cost-cutting goals.

Even at that, Poulin said the company still needs to fully integrate the Safeway stores with Sobeys’ point-of-sale computer system, among other things, if it is to achieve the synergies it wants from the first year.

The number of stores being closed sounds like a lot, especially since 30 of those targeted are in Western Canada. Also, the federal competition bureau had earlier required Empire and Sobeys to divest 30 stores before it would approve the Canada Safeway transaction.

Empire chief financial officer Francois Vimard said during the conference call that about 15 of the stores were smaller operations, with retail space of less than 20,000 square feet.

Poulin said eliminating weaker stores should shore up the overall performance of the food chain and will allow management to better focus on stores that provide the best growth opportunity.

Empire on Thursday also reported its fourth-quarter and fiscal 2013-14 year-end results.

For the 13 weeks that ended May 3, Empire reported consolidated net earnings from continuing operations, less non-controlling interest, of $1.5 million (two cents per fully diluted share). During the fourth quarter last year, Empire reported consolidated net earnings, less non-controlling interest, of $102.5 million ($1.51 per fully diluted share).

Empire, which is now primarily a food and related real estate company, reported fourth-quarter sales from food retailing of $5.94 billion, a $1.68-billion jump in sales over the $4.26 billion it reported for the same quarter last year.

However, sales were up only 2.2 per cent if the Safeway numbers are excluded. Sobeys’ same-store sales increased only 0.2 per cent.

“The growth in the fourth-quarter sales was a direct result of continued increased retail selling per square footage from new stores and enlargements, coupled with the continued implementation of sales and merchandising initiatives, improved consistency of store-level execution, and product and service innovation,” the company stated.

For fiscal 2013-14, Empire reported consolidated net earnings from continuing operations, net of non-controlling interest, of $151 million ($1.88 per diluted share) compared to $372.3 million ($5.47 per diluted share) for 2012-13.

Empire’s food retailing business reported adjusted fourth-quarter EBITDA — earnings before interest, taxes, depreciation and amortization, frequently used as a measure of profitability — was $301.6 million, compared to EBITDA of $209 million in the same quarter last year.

For the full year, the food retailer indicated adjusted EBITDA of $999.2 million, compared to $848 million in fiscal 2012-13.

Competition in the grocery business in Canada is “brutal,” Poulin said. Promotional activity is intense, and Sobeys’ efforts to offer healthier food through its Better Food For All campaign, he said, has also meant an increase in “shrink,” which is the amount of product that is not or cannot be sold.

That doesn’t mean Sobeys will be giving up on the campaign, said Poulin, adding that shrink has improved recently.